Planner Howard Pitts is a big fan of transparency.
He uses the word often when describing the kind of business he likes to run, and sees it as a vital component of a professional planning industry.
Commissions, on the other hand, do not play a role.
“Clients are much more open and receptive when you are transparent,” Pitt says. “And I think if people want to go to a person who charges commissions, they should at least be aware of what that means.”
Indeed. Pitts has about 54 consumer reviews on the Adviser Ratings website and every single one of them is glowing. The relationship he has developed with his clients over the last 18 years is based on openness.
When he entered the planning industry in the late 1990s, he saw a galling lack of transparency.
Pitts had spent years as an actuary – including seven years studying at university to be one – but found the move into planning a shock in some respects.
“I saw a commission culture, which is a major conflict of interest, and there were business buy-out deals that did not sit well with me,” he recalls. “I thought if I am going to work in small business, I want to set it up the way I want it to run, which is by a transparent fee structure.”
Pitts was an early adopter of the fee-based system and says it gave him an early competitive advantage over others.
“The clients’ needs become the focus that way,” he says.
As a result, his clients have no doubt as to what they are paying for: Pitts’ expertise, experience and counselling.
“In a way, you do become a counsellor, because my conversations become more about helping clients achieve what they want to achieve and working out what they aspire to do with their money,” he says. “That becomes the focus more than, say, whether something is performing .5 per cent one way or another.”
He also helps identify risk and help clients prepare for their retirement, although he is keen to point out that he cannot read what the future will bring.
“The GFC was a shock to many people and that was really when you find out people’s true risk profile, when you go through something like that.
“I had one client who almost withdrew all his money to hide it under the mattress. It was a very challenging time for a lot of people. I think we need to prepare ourselves for something like that in the future.
“I don’t think it will be as bad as the GFC, but there will be another correction at some point.”
Pitts says that, while he could understand the government’s desire to raise standards through the recent creation of a new Financial Adviser Standards and Ethics Authority, he wasn’t thrilled at the prospect of mandatory learning.
“I spent many years studying and the thought of doing more exams to satisfy some government initiative doesn’t thrill me,” he says. “I see it as a form of tick-the-box compliance, rather than appropriate qualitative assessment.”
Pitt points out that consumers are a lot savvier these days, too.
“The problem is the bad reputation of the industry and it has been described as structurally corrupt,” he says. “But people see things like the collapse of Storm Financial and see people who are devastated by these financial scandals, and they are much smarter as a result.”
| Howard Pitts
Name of firm: Arc Financial Solutions
Name of licensee: Arc Financial Solutions
Time in the industry (previous jobs?): 18 years as a planner, 34 years in industry; previously a corporate superannuation consultant
Academic qualifications: Bachelor of economics and diploma of financial planning
Accreditations: Fellow of Institute of Actuaries in Australia
Professional association memberships: Institute of Actuaries of Australia, Independent Financial Advisers Association of Australia
Other memberships: ADF Referral program
TOPICS: Arc Financial Solutions, fee-for-service remuneration structures, Financial Adviser Standards and Ethics Authority, Howard Pitts